There was quite a bit of taper tantrum talk Tuesday, as US yields hit the highest since the onset of the pandemic.
10s were through 1.25% and 30-year yields were perched at 2.05%. At one point, 10s hit 1.265% and 30s nearly 2.08%.
It’s getting interesting now. Global bonds are off to their worst start to a year since 2013, and that’s where the “tantrum” talk comes in. Bloomberg ran a feature piece Tuesday that offered a history lesson, perhaps for the benefit of some in the Robinhood/Reddit set, who may be too young to remember 2013. “Bonds fell in the first months of that year even before the taper tantrum,” the article began.
The February vintage of BofA’s Global Fund Manager Survey contained anther 2013 parallel — cash levels haven’t been this low since just before Bernanke triggered that year’s rapid backup in yields.
“FMS cash levels [are] down to 3.8%, [the] lowest since March 2013 just before Bernanke’s ‘taper tantrum’,” the bank’s Michael Hartnett wrote.
Meanwhile, survey respondents’ allocation to stocks and commodities is the highest in a decade, with “a record number [of] investors taking ‘higher-than-normal’ risk,” Hartnett went on to say.
This comes as equity funds raked in record inflows during the last week’s reporting period, and amid all manner of “bubble” warnings and other shrill protestations at stocks’ refusal to roll over or otherwise relent to gravity. Global equities were riding a 12-session win streak Tuesday.
Of course, part and parcel of recent optimism is the vaunted reflation narrative. The idea is that stocks can digest rate rise with relative alacrity as long as yields don’t rise too far, too fast, and as long as higher yields are indicative of improving growth expectations. We’ll see how it goes now that 1.25% on US 10s has been breached.
More than 200 participants were included in this month’s BofA survey. Collectively, they manage more than $600 billion in AUM. Just 13% said US equities are a bubble.
Around a quarter said the US is in an early-stage bull market. More than half called it a late-stage bull market.
If it is a “late-stage bull market” that would be quite something. After all, we were in a bear market less than a year ago. That lasted all of what felt like a couple of hours thanks to the Fed. Now here we are 11 months on from the worst public health crisis in a century (which is ongoing, by the way) and we can’t decide what kind of bull market this is, or whether, in fact, it’s a bubble.
As BofA’s Hartnett put it, “Bottom line: The only reason to be bearish is…there is no reason to be bearish.”
Meanwhile, you’re reminded that nobody on Main Street cares (figure below).
For everyday people, this is all just gibberish.